KNCCI raises concerns over levy imposed on exports of food crops

The Kenya National Chamber of Commerce and Industry (KNCCI) and the Cereal Growers Association (CGA) have expressed their worries about the newly introduced 0.3% tax on the export of all food crops which has been implemented by the Agriculture and Food Authority (AFA).

In a press release issued on Thursday, May 30, 2024, both organizations voiced their concerns about the potential negative impact of this levy on the agriculture sector, which is a vital part of Kenya’s economy.

“The Kenya National Chamber of Commerce and Industry (KNCCI) and the Cereal Growers Association (CGA) express deep concern regarding the recent imposition of a 0.3% levy on the export of cereals, legumes, and roots and tubers by the Agriculture and Food Authority (AFA).”

According to KNCCI and CGA, agriculture accounts for 21.8% of the country’s GDP and is the second-largest employer in the private sector.

“The imposition of this levy threatens to reverse the gains made in promoting agricultural exports, making our produce less competitive in the international markets. This levy stands in stark contrast to the government’s efforts to enhance export growth, which is crucial for stabilizing and strengthening our currency,” the statement reads in part.

KNCCI and CGA emphasized that rather than facilitating growth, the new levy would add a burden on farmers and exporters.

This could lead to reduced export volumes and lower foreign exchange earnings. The timing of the levy is also seen as problematic, especially since cereal exports have been declining over the past four years, with a brief recovery in 2023.

“Introducing an export levy now would stifle this nascent recovery, undermining the efforts of our farmers and exporters to regain lost ground. It is essential to allow the cereal export sector to stabilize and grow without additional financial burden. Doing so will support long-term economic resilience and enhance our competitive position in the global market,” the statement added further.

Additionally, KNCCI and CGA called for immediate clarification on a recently introduced import levy, questioning whether it applies to imports from the East African Community (EAC) and Common Market for Eastern and Southern Africa (COMESA) member countries. They warned that such levies could undermine the benefits of regional trade agreements.

“We urge the government to reconsider the imposition of this export levy and to engage in constructive dialogue with stakeholders in the agricultural sector. It is crucial to explore alternative measures that can enhance our export capabilities without imposing undue burden on our farmers and exporters.”

Adding;

“KNCCI and CGA remain committed to advocating for policies that support the growth and sustainability of Kenya’s agricultural sector. We believe that through collaborative efforts and open dialogue, we can achieve solutions that align with our national objectives and promote the welfare of our farmers and the broader economy.”

PRESS STATEMENT – Concerns Over Imposition of Export Levy on Food Crops by AFA pic.twitter.com/DB2SbVruH4

— Kenya Chamber (@kenya_chamber) May 30, 2024

New levy on food crops

On May 28, 2024, the government declared the introduction of new taxes on the import and export of all food crop products, effective from July 1, 2024.

Bruno Linyiru, the Director General of the Agriculture and Food Authority (AFA), announced in a local newspaper that traders should prepare for the new levies outlined in the Crops (Food Crops) Regulations, 2019.

Starting July 1, 2024, importers and exporters of legumes, pulses, cereals, and root and tuber crops will face new taxes ranging from 0.3% to 2% of the customs value. Importers of cereals will be required to pay a 2% levy on the customs value of their cargo, which indicates a rise in business costs. Conversely, exporters of cereals will incur a levy of 0.3% on the value of their goods.

Linyiru further explained that imports of legumes will attract a 2% charge, while exports will be taxed at 0.3%. For root crops, imports will be subjected to a 1% levy, with exports facing a 0.3% charge.

He emphasized that the AFA is responsible for implementing the Crops Act 2013. The cabinet secretary, in collaboration with the authority and county governments, has the authority to create regulations to effectively enforce the provisions of the Act, as stated in the notice.

“Importers of cereals will pay 2 per cent of the customs value of the cargo, an indication of an increase in the cost of doing business. While cereals exporters will pay a custom value equivalent to 0.3 per cent of the commodity being shipped out of the country. Any legumes being imported into the country will be charged 2 per cent and exports will be levied 0.3 per cent.  And root crops being imported into the country will charge one per cent and 0.3 per cent to exports,” Linyuru announced.

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